Managing in the Global Arena 5

1. An understanding of international management and its importance to modern managers An understanding of what constitutes a multinational corporation Insights concerning the risk involved in investing in international operations Insights into those who work in multinational corporations

Knowledge about managing multinational corporations Knowledge about managing multinational organizations versus transnational ones An understanding of how ethics and the preparation of expatriates relate to managing internationally

Managing Across the Globe: Why? Most U.S. Companies See Opportunities Population in Other Countries is Exploding

Fundamentals of International Management Globalization International management is the performance of management activities across national borders. It entails reaching organizational objectives by extending management activities to include an emphasis on organizations in foreign countries. Globalization, which will be discussed later, is the trend toward increased international management.

Fundamentals of International Management This chart illustrates U.S. investment in foreign countries and investment by foreign countries in the United States. It shows that both have grown since 2000 and are expected to continue growing, with slowdowns or setbacks in recessionary periods.

Fundamentals of International Management This chart shows that in 2010, U.S. foreign investments have focused most heavily in Canada and Europe.

Fundamentals of International Management This chart shows that European countries are by far the most significant foreign investors in the United States (in 2010).

Categorizing Organizations by International Involvement Domestic Organizations International Organizations Multinational Organizations A domestic organization is one that operates within a single country. An international organization is one that is based primarily within a single country, but has continuing, meaningful international transactions (such as making sales and purchases of materials) in other countries. A Multinational Corporation (or MNC) is an organization that has significant operations in more than one country. MNCs are explored over the next several slides.

Categorizing Organizations by International Involvement This figure illustrates the degree of international involvement, with domestic organizations having the least, and transnational the highest involvement.

Categorizing Organizations by International Involvement Defining the MNC Complexities of Managing the MNC Though MNC has already been defined, it’s important to point out that a MNC is an organization that is involved in doing business at the international level. It carries out its activities on an international scale that disregards national boundaries, and it is guided by a common strategy from a corporation center. International management differs from domestic management because it involves operating: Within different national sovereignties Under widely disparate economic conditions Among people living within different value systems and institutions In places experiencing the industrial revolution at different times Often over greater geographical distance In national markets varying greatly in population and area

Categorizing Organizations by International Involvement This table illustrates that MNCs can range from slightly multinationalized organizations that simply export products to a foreign country to highly multinationalized organizations that have some of their owners in other countries.

Categorizing Organizations by International Involvement Risk and the MNC The Workforce of MNCs This is a good time define the terms parent company and host country. A parent company is the company investing in the international operations. A host country is the country in which the investment is made. With regard to the workforce of MNCs, as organizations become more global, their members tend to become more diverse. Managers of MNCs face the continual challenge of building a competitive business team made up of people of different races who speak different languages and come from different parts of the world (the workforce of MNCs is picked up again after the next slide).

Categorizing Organizations by International Involvement This complex chart shows some of the more important management implications of the six variables in an international system, as well as the relationships among them.

Categorizing Organizations by International Involvement The Workforce of MNCs Types of Organization Members Workforce Adjustments Adjusting to a New Culture Repatriation Workers in MNCs can be divided into three types: expatriate (an organization member who lives and works in a country where he or she does not have citizenship), host-country national (an organization member who is a citizen of the country in which the facility of a foreign-based organization is located), and third-country national (an organization member who is a citizen of one country and works in another country for an organization headquartered in still another country). Working in a MNC requires more difficult adjustments than working in an organization that focuses primarily on domestic activities. Upon arrival in a foreign country, many people experience confusion, anxiety, and stress related to the need to make cultural adjustments in their organizational and personal lives. Repatriation is the process of bringing individuals who have been working abroad back to their home country and reintegrating them into the organization’s home-country operations.

Management Functions and Multinational Corporations Planning in Multicultural Corporations Components of International Plans Imports/Exports License Agreements Direct Investing Joint Ventures This is a good time to review the concept of planning from Chapter 1. Here, the major components of planning in a MNC are explored. Importing is buying goods or services from another country. Exporting is selling goods or services to another country. A license agreement is a right granted by one company to another to use its brand name, technology, product specifications, etc. in the manufacture or sale of goods or services. Direct investing uses the assets of one company to purchase the operating assets (such as factories) of another company. An international joint venture is a partnership formed by a company in one country with a company in another country for the purpose of pursuing some mutually desirable business undertaking.

Management Functions and Multinational Corporations Planning in Multicultural Corporations (continued) Planning and International Market Agreements The European Union (EU) North American Free Trade Agreement (NAFTA) Asian-Pacific Economic Cooperation (APEC) An international market agreement is an arrangement among a cluster of countries that facilitates a high level of trade among these countries. The EU is an international market agreement established in 1994 dedicated to facilitating trade among member nations (a map of the EU is presented on the next slide). NAFTA is an international market agreement aimed at facilitating trade between the U.S., Canada, and Mexico. APEC was established in 1989 to further the economic growth and prosperity of the Asia-Pacific community (a map of APEC is presented two slides hence).

Management Functions and Multinational Corporations This map illustrates members of the EU as well as membership candidate countries and those countries with pending applications.

Management Functions and Multinational Corporations This map illustrates the members of APEC.

Management Functions and Multinational Corporations Organizing Multicultural Corporations Organization Structure Selection of Managers Managerial Attitudes Toward Foreign Operations Advantages and Disadvantages of Management Attitude Organization structure is the sum of all established relationships among resources within the organization. An organizational chart is the graphic illustration of organization structure (partial organizational charts are depicted on the next slide). For MNCs to thrive, they must have competent managers. One characteristic believed to be a primary determinant of how competently managers can guide MNCs is their attitude toward how such organizations should operate. Three definitions are important in understanding managerial attitudes: ethnocentric attitude (reflects the belief that MNCs should regard home-country management practices as superior to foreign-country management practices, polycentric attitude (reflects the belief that because foreign managers are closer to foreign organizational units, they probably understand them better, and therefore foreign management practices should generally be viewed as more insightful than home-country management practices), and geocentric attitude (believes that the overall quality of management recommendations should determine the acceptability of management practices used to guide MNCs).

Management Functions and Multinational Corporations This figure shows several ways in which organization charts can be designed for MNCs.

Management Functions and Multinational Corporations Influencing People in Multicultural Corporations Culture Hofstede’s Ideas for Describing Culture Culture is the set of characteristics of a given group of people and their environment. Geert Hofstede states that national culture values vary on five basic dimensions: Power distance Uncertainty avoidance Individualism and collectivism Masculinity and femininity Short-term and long-term orientation

Management Functions and Multinational Corporations Controlling Multicultural Corporations Special Difficulties Improving Organizations Review with students the definition of Controlling from Chapter 1. Some special difficulties involving control in MNCs includes different currencies and the geographic separation between business units. One step managers in an MNC can take to improve the organization is to carefully design the communication network or information system that links business units.

Management Functions and Multinational Corporations Transnational Organizations (Global organization) A transnational organization takes the entire world as its business arena. Doing business wherever it makes sense is primary; national borders are considered inconsequential. A transnational organization is also called a global organization.

International Management: Special Issues Maintaining Ethics in International Management Respecting core human rights Respecting local traditions Determining right from wrong by examining content

International Management: Special Issues Preparing Expatriates for Foreign Assignments Cultural profiles Cultural adaptation Logistical information Application Many companies prepare their expatriates for foreign assignments by using special training programs. Specific features of these programs vary, but usually contain these: Culture profiles: expatriates learn about the new culture in which they will be working Cultural adaptation: expatriates learn how to survive the difficulties of adjusting to a new culture Logistical information: expatriates learn basic information, such as personal safety, who to call in an emergency, and how to write a check Application: expatriates learn about specific organizational roles they will perform